- For Fourth Quarter 2019, Zoetis Reports Revenue of $1.7
Billion, Growing 7%, and Net Income of $384 Million, or $0.80 per
Diluted Share, on a Reported Basis
- Reports Adjusted Net Income of $440 Million, or Adjusted
Diluted EPS of $0.92, for Fourth Quarter 2019
- Delivers 9% Operational Growth in Revenue and 13%
Operational Growth in Adjusted Net Income for Fourth Quarter
2019
- For Full Year 2019, Zoetis Reports Revenue of $6.3 Billion,
Growing 7%, and Net Income of $1.5 Billion, or $3.11 per Diluted
Share, on a Reported Basis
- Reports Adjusted Net Income of $1.8 Billion, or Adjusted
Diluted EPS of $3.64, for Full Year 2019
- Delivers 10% Operational Growth in Revenue and 14%
Operational Growth in Adjusted Net Income for Full Year
2019
- Provides Full Year 2020 Revenue Guidance of $6.650 - $6.800
Billion, with Diluted EPS of $3.53 - $3.65 on a Reported Basis, or
$3.90 - $4.00 on an Adjusted Basis
Zoetis Inc. (NYSE: ZTS) today reported its financial results for
the fourth quarter and full year 2019 and provided full year
guidance for 2020.
The company reported revenue of $1.7 billion for the fourth
quarter of 2019, which was an increase of 7% compared with the
fourth quarter of 2018. Net income for the fourth quarter of 2019
was $384 million, or $0.80 per diluted share, compared with $345
million, or $0.71 per diluted share, in the fourth quarter of
2018.
Adjusted net income1 for the fourth quarter of 2019 was $440
million, or $0.92 per diluted share, an increase of 15% and 16%,
respectively. Adjusted net income for the fourth quarter of 2019
excludes the net impact of $56 million for purchase accounting
adjustments, acquisition-related costs and certain significant
items.
On an operational2 basis, revenue for the fourth quarter of
2019, excluding the impact of foreign exchange, increased 9%
compared with the fourth quarter of 2018. Adjusted net income for
the fourth quarter of 2019 increased 13% operationally, excluding
the impact of foreign exchange.
For full year 2019, the company reported revenue of $6.3
billion, an increase of 7% compared with full year 2018. Net income
for full year 2019 was $1.5 billion, or $3.11 per diluted share, an
increase of 5% and 6%, respectively.
Adjusted net income for full year 2019 was $1.8 billion, or
$3.64 per diluted share, an increase of 15% and 16%, respectively.
Adjusted net income for full year 2019 excludes the net impact of
$255 million for purchase accounting adjustments,
acquisition-related costs and certain significant items.
On an operational basis, revenue for full year 2019 increased
10%, excluding the impact of foreign exchange. Adjusted net income
for full year 2019 increased 14% operationally, excluding the
impact of foreign exchange.
EXECUTIVE COMMENTARY
“In 2019, Zoetis delivered another year of strong growth and
market leadership thanks to our diverse and durable portfolio and
commitment to continuous innovation,” said Kristin Peck, Chief
Executive Officer of Zoetis. “We grew revenue 10% operationally,
which is once again above market growth in a competitive, global
sector. We also grew our adjusted net income faster than revenue,
at 14% operationally, continuing to achieve our goal of growing
profitability faster than revenue over the long term.”
“Looking ahead in 2020, we are excited about the launch of
Simparica® Trio, our new triple combination parasiticide for dogs,
and we will be heavily focused on bringing this key innovation to
customers around the world,” said Peck. “Additionally, we will
continue to advance our pipeline with innovations in parasiticides,
monoclonal antibodies and vaccines; support our latest product
launches and lifecycle innovations across the portfolio; and invest
in newer growth areas for us such as diagnostics, digital and data
analytics. For full year 2020, we expect operational growth of 7%
to 9.5% in revenue and 8% to 11% in adjusted net income. As the new
CEO of Zoetis, I look forward to carrying on the company’s
successful formula of customer focus, innovation and execution, as
we continue to deliver on our long-term value proposition to
shareholders.”
QUARTERLY HIGHLIGHTS
Zoetis organizes and manages its commercial operations across
two regional segments: the United States (U.S.) and International.
Within these segments, the company delivers a diverse portfolio of
products for companion animals and livestock tailored to local
trends and customer needs. In the fourth quarter of 2019:
- Revenue in the U.S. segment was $861 million, an
increase of 6% compared with the fourth quarter of 2018. Sales of
companion animal products increased 15% driven primarily by growth
in our key dermatology portfolio across both the Apoquel® and
Cytopoint® brands. Additionally, companion animal sales benefited
from the recent acquisition of Platinum Performance and its
nutritional product formulas. Increased sales of parasiticides,
including ProHeart® 12 and Simparica®, also significantly
contributed to growth in the quarter. Sales of livestock products
declined 3% in the quarter. This decline was the result of
continued weakness in both the beef and dairy cattle sectors which
more than offset double digit growth in poultry and swine. Growth
in poultry was driven primarily by increased sales of Zoamix®, an
alternative to antibiotics in medicated feed additives, while
growth in swine was the result of increased sales of medicated feed
additives and vaccines.
- Revenue in the International segment was $791 million,
an increase of 9% on a reported basis and an increase of 12%
operationally compared with the fourth quarter of 2018. Sales of
companion animal products grew 23% on a reported basis and 26% on
an operational basis. Growth resulted primarily from increased
sales across our key dermatology portfolio and in certain
parasiticides, including Simparica and the Revolution®/Stronghold®
franchise, as well as growth across key markets in Western Europe
and in China. New diagnostics accounts in the UK and emerging
markets also contributed to growth. Sales of livestock products
grew 2% on a reported basis and 5% operationally. Growth in our
cattle portfolio was driven by favorable conditions in key markets,
including Australia, Germany and Mexico, as well as other smaller
developed markets. Alpha Flux®, a recently launched parasiticide
that controls sea lice in salmon, was the primary driver of growth
in fish, while promotional activities across Russia, India and
Brazil drove growth in poultry. Sales of swine products declined as
a result of the ongoing impact of African Swine Fever in China and
other smaller markets in Southeast Asia.
INVESTMENTS IN GROWTH
Zoetis diversifies and grows its business through the
introduction of new products, lifecycle innovations, business
development initiatives, and entries into new markets and
technologies. The company is increasingly focused on developing
integrated solutions for pet owners, veterinarians and farmers that
span the continuum of animal care - helping to predict, prevent,
detect and treat diseases.
Since our last quarterly earnings announcement, Zoetis has
continued to expand its reference laboratory capabilities in the
U.S. with the acquisitions of Phoenix Lab and ZNLabs
in November 2019 and Ethos Diagnostic Science this month.
This builds on the company’s strategy to develop a more
comprehensive diagnostics offering with enhanced value for
veterinarians.
Zoetis also received approval for Rimadyl® (carprofen)
for dogs in China, one of the fastest growing companion animal
markets in the world. This product, approved in both chewable and
injectable formulations, is indicated for the relief of pain and
inflammation associated with osteoarthritis (chewables), and for
the control of postoperative pain associated with soft tissue and
orthopedic surgeries (injectable). It was first approved in the UK
in 1993, and is an example of the product durability and longevity
generated by the company’s focus on lifecycle innovation and
geographic expansion.
FINANCIAL GUIDANCE
Zoetis is providing full year 2020 guidance, which includes:
- Revenue between $6.650 billion to $6.800 billion
- Reported diluted EPS between $3.53 to $3.65
- Adjusted diluted EPS between $3.90 to $4.00
This guidance reflects foreign exchange rates as of late
January. Additional details on guidance are included in the
financial tables and will be discussed on the company's conference
call this morning.
WEBCAST & CONFERENCE CALL
DETAILS
Zoetis will host a webcast and conference call at 8:30 a.m. (ET)
today, during which company executives will review fourth quarter
and full year 2019 results, discuss financial guidance and respond
to questions from financial analysts. Investors and the public may
access the live webcast by visiting the Zoetis website at
http://investor.zoetis.com/events-presentations. A
replay of the webcast will be archived and made available on Feb.
13, 2020.
About Zoetis
Zoetis is the leading animal health
company, dedicated to supporting its customers and their
businesses. Building on more than 65 years of experience in animal
health, Zoetis discovers, develops, manufactures and commercializes
medicines, vaccines and diagnostic products, which are complemented
by biodevices, genetic tests and precision livestock farming.
Zoetis serves veterinarians, livestock producers and people who
raise and care for farm and companion animals with sales of its
products in more than 100 countries. In 2019, the company generated
annual revenue of $6.3 billion with approximately 10,600 employees.
For more information, visit www.zoetis.com.
1 Adjusted net income and its components and adjusted diluted
earnings per share (non-GAAP financial measures) are defined as
reported net income attributable to Zoetis and reported diluted
earnings per share, excluding purchase accounting adjustments,
acquisition-related costs and certain significant items.
2 Operational revenue growth (a non-GAAP financial measure) is
defined as growth excluding the impact of foreign exchange.
DISCLOSURE NOTICES
Forward-Looking Statements: This
press release contains forward-looking statements, which reflect
the current views of Zoetis with respect to business plans or
prospects, future operating or financial performance, future
guidance, future operating models, expectations regarding products,
product approvals or products under development, expected timing of
product launches, expectations regarding the performance of
acquired companies and our ability to integrate new businesses,
expectations regarding the financial impact of acquisitions, future
use of cash and dividend payments, tax rate and tax regimes,
changes in the tax regimes and laws in other jurisdictions, and
other future events. These statements are not guarantees of future
performance or actions. Forward-looking statements are subject to
risks and uncertainties. If one or more of these risks or
uncertainties materialize, or if management's underlying
assumptions prove to be incorrect, actual results may differ
materially from those contemplated by a forward-looking statement.
Forward-looking statements speak only as of the date on which they
are made. Zoetis expressly disclaims any obligation to update or
revise any forward-looking statement, whether as a result of new
information, future events or otherwise. A further list and
description of risks, uncertainties and other matters can be found
in our Annual Report on Form 10-K for the fiscal year ended
December 31, 2018, including in the sections thereof captioned
“Forward-Looking Statements and Factors That May Affect Future
Results” and “Item 1A. Risk Factors,” in our Quarterly Reports on
Form 10-Q and in our Current Reports on Form 8-K. These filings and
subsequent filings are available online at www.sec.gov, www.zoetis.com, or on request from Zoetis.
Use of Non-GAAP Financial Measures:
We use non-GAAP financial measures, such as adjusted net income,
adjusted diluted earnings per share and operational results (which
exclude the impact of foreign exchange), to assess and analyze our
results and trends and to make financial and operational decisions.
We believe these non-GAAP financial measures are also useful to
investors because they provide greater transparency regarding our
operating performance. The non-GAAP financial measures included in
this press release should not be considered alternatives to
measurements required by GAAP, such as net income, operating
income, and earnings per share, and should not be considered
measures of liquidity. These non-GAAP financial measures are
unlikely to be comparable with non-GAAP information provided by
other companies. Reconciliation of non-GAAP financial measures and
GAAP financial measures are included in the tables accompanying
this press release and are posted on our website at www.zoetis.com.
Internet Posting of Information: We
routinely post information that may be important to investors in
the 'Investors' section of our website at www.zoetis.com, on our Facebook page at
http://www.facebook.com/zoetis and on
Twitter@zoetis. We encourage investors
and potential investors to consult our website regularly and to
follow us on Facebook and Twitter for important information about
us.
ZOETIS INC.
CONDENSED CONSOLIDATED STATEMENTS
OF INCOME(a)
(UNAUDITED)
(millions of dollars, except per
share data)
Fourth Quarter
Full Year
2019
2018
% Change
2019
2018
% Change
Revenue
$
1,674
$
1,564
7
$
6,260
$
5,825
7
Costs and expenses:
Cost of sales
530
544
(3
)
1,992
1,911
4
Selling, general and administrative
expenses
472
420
12
1,638
1,484
10
Research and development expenses
132
125
6
457
432
6
Amortization of intangible assets
40
39
3
155
117
32
Restructuring charges and certain
acquisition-related costs
18
14
29
51
68
(25
)
Interest expense
56
59
(5
)
223
206
8
Other (income)/deductions–net
(11
)
(55
)
(80
)
(57
)
(83
)
(31
)
Income before provision for taxes on
income
437
418
5
1,801
1,690
7
Provision for taxes on income
53
73
(27
)
301
266
13
Net income before allocation to
noncontrolling interests
384
345
11
1,500
1,424
5
Less: Net loss attributable to
noncontrolling interests
—
—
—
—
(4
)
*
Net income attributable to Zoetis
$
384
$
345
11
$
1,500
$
1,428
5
Earnings per share—basic
$
0.81
$
0.72
13
$
3.14
$
2.96
6
Earnings per share—diluted
$
0.80
$
0.71
13
$
3.11
$
2.93
6
Weighted-average shares used to calculate
earnings per share
Basic
476.4
480.6
478.1
483.1
Diluted
480.2
484.5
481.8
486.9
(a)
The Condensed Consolidated Statements of
Income present the three and twelve months ended December 31, 2019
and 2018. Subsidiaries operating outside the U.S. are included for
the three and twelve months ended November 30, 2019 and 2018.
* Calculation not meaningful.
ZOETIS INC.
RECONCILIATION OF GAAP REPORTED
TO NON-GAAP ADJUSTED INFORMATION
CERTAIN LINE ITEMS
(UNAUDITED)
(millions of dollars, except per
share data)
Quarter Ended December 31,
2019
GAAP Reported(a)
Purchase Accounting
Adjustments
Acquisition- Related Costs(1)
Certain Significant Items(2)
Non-GAAP Adjusted(b)
Cost of sales
$
530
$
(2
)
$
—
$
(1
)
$
527
Gross profit
1,144
2
—
1
1,147
Selling, general and administrative
expenses
472
(18
)
—
(2
)
452
Research and development expenses
132
(1
)
—
—
131
Amortization of intangible assets
40
(34
)
—
—
6
Restructuring charges and certain
acquisition-related costs
18
—
(10
)
(8
)
—
Other (income)/deductions–net
(11
)
—
—
—
(11
)
Income before provision for taxes on
income
437
55
10
11
513
Provision for taxes on income
53
19
1
—
73
Net income attributable to Zoetis
384
36
9
11
440
Earnings per common share attributable to
Zoetis–diluted
0.80
0.08
0.02
0.02
0.92
Quarter Ended December 31,
2018
GAAP Reported(a)
Purchase Accounting
Adjustments
Acquisition- Related Costs(1)
Certain Significant Items(2)
Non-GAAP Adjusted(b)
Cost of sales
$
544
$
(14
)
$
—
$
(4
)
$
526
Gross profit
1,020
14
—
4
1,038
Selling, general and administrative
expenses
420
(18
)
—
(1
)
401
Research and development expenses
125
(1
)
—
—
124
Amortization of intangible assets
39
(34
)
—
—
5
Restructuring charges and certain
acquisition-related costs
14
—
(22
)
8
—
Other (income)/deductions–net
(55
)
—
—
42
(13
)
Income before provision for taxes on
income
418
67
22
(45
)
462
Provision for taxes on income
73
16
4
(13
)
80
Net income attributable to Zoetis
345
51
18
(32
)
382
Earnings per common share attributable to
Zoetis–diluted
0.71
0.11
0.04
(0.07
)
0.79
(a)
The Condensed Consolidated Statements of
Income present the quarter ended December 31, 2019 and 2018.
Subsidiaries operating outside the U.S. are included for the
quarter ended November 30, 2019 and 2018.
(b)
Non-GAAP adjusted net income and its
components and non-GAAP adjusted diluted EPS are not, and should
not be viewed as, substitutes for U.S. GAAP net income and its
components and diluted EPS. Despite the importance of these
measures to management in goal setting and performance measurement,
non-GAAP adjusted net income and its components and non-GAAP
adjusted diluted EPS are non-GAAP financial measures that have no
standardized meaning prescribed by U.S. GAAP and, therefore, have
limits in their usefulness to investors. Because of the non-
standardized definitions, non-GAAP adjusted net income and its
components and non-GAAP adjusted diluted EPS (unlike U.S. GAAP net
income and its components and diluted EPS) may not be comparable to
the calculation of similar measures of other companies. Non-GAAP
adjusted net income and its components, and non-GAAP adjusted
diluted EPS are presented solely to permit investors to more fully
understand how management assesses performance.
See Notes to Reconciliation of GAAP Reported to Non-GAAP Adjusted
Information for notes (1) and (2).
ZOETIS INC.
RECONCILIATION OF GAAP REPORTED
TO NON-GAAP ADJUSTED INFORMATION
CERTAIN LINE ITEMS
(UNAUDITED)
(millions of dollars, except per
share data)
Twelve Months Ended December 31,
2019
GAAP Reported(a)
Purchase Accounting
Adjustments
Acquisition- Related Costs(1)
Certain Significant Items(2)
Non-GAAP Adjusted(b)
Cost of sales
$
1,992
$
(24
)
$
—
$
(77
)
$
1,891
Gross profit
4,268
24
—
77
4,369
Selling, general and administrative
expenses
1,638
(72
)
—
(2
)
1,564
Research and development expenses
457
(2
)
—
—
455
Amortization of intangible assets
155
(136
)
—
—
19
Restructuring charges and certain
acquisition-related costs
51
—
(43
)
(8
)
—
Other (income)/deductions–net
(57
)
—
—
20
(37
)
Income before provision for taxes on
income
1,801
234
43
67
2,145
Provision for taxes on income
301
78
7
4
390
Net income attributable to Zoetis
1,500
156
36
63
1,755
Earnings per common share attributable to
Zoetis–diluted
3.11
0.32
0.08
0.13
3.64
Twelve Months Ended December 31,
2018
GAAP Reported(a)
Purchase Accounting
Adjustments
Acquisition- Related Costs(1)
Certain Significant Items(2)
Non-GAAP Adjusted(b)
Cost of sales
$
1,911
$
(27
)
$
—
$
(8
)
$
1,876
Gross profit
3,914
27
—
8
3,949
Selling, general and administrative
expenses
1,484
(32
)
—
(2
)
1,450
Research and development expenses
432
(2
)
—
—
430
Amortization of intangible assets
117
(101
)
—
—
16
Restructuring charges and certain
acquisition-related costs
68
—
(63
)
(5
)
—
Other (income)/deductions–net
(83
)
—
—
58
(25
)
Income before provision for taxes on
income
1,690
162
63
(43
)
1,872
Provision for taxes on income
266
43
13
29
351
Net income attributable to Zoetis
1,428
119
50
(72
)
1,525
Earnings per common share attributable to
Zoetis–diluted
2.93
0.24
0.10
(0.14
)
3.13
(a)
The Condensed Consolidated Statements of
Income present the twelve months ended December 31, 2019 and 2018.
Subsidiaries operating outside the U.S. are included for the twelve
months ended November 30, 2019 and 2018.
(b)
Non-GAAP adjusted net income and its
components and non-GAAP adjusted diluted EPS are not, and should
not be viewed as, substitutes for U.S. generally accepted
accounting principles (GAAP) net income and its components and
diluted EPS. Despite the importance of these measures to management
in goal setting and performance measurement, non-GAAP adjusted net
income and its components and non-GAAP adjusted diluted EPS are
non-GAAP financial measures that have no standardized meaning
prescribed by U.S. GAAP and, therefore, have limits in their
usefulness to investors. Because of the non-standardized
definitions, non-GAAP adjusted net income and its components and
non-GAAP adjusted diluted EPS (unlike U.S. GAAP net income and its
components and diluted EPS) may not be comparable to the
calculation of similar measures of other companies. Non-GAAP
adjusted net income and its components, and non-GAAP adjusted
diluted EPS are presented solely to permit investors to more fully
understand how management assesses performance.
See Notes to Reconciliation of GAAP
Reported to Non-GAAP Adjusted Information for notes (1) and
(2).
ZOETIS INC.
NOTES TO RECONCILIATION OF GAAP
REPORTED TO NON-GAAP ADJUSTED INFORMATION
CERTAIN LINE ITEMS
(UNAUDITED)
(millions of dollars)
(1) Acquisition-related costs include the
following:
Fourth Quarter
Full Year
2019
2018
2019
2018
Transaction costs(a)
$
—
$
—
$
—
$
21
Integration costs(b)
5
11
18
21
Restructuring charges(c)
5
11
25
21
Total acquisition-related
costs—pre-tax
10
22
43
63
Income taxes(d)
1
4
7
13
Total acquisition-related costs—net of
tax
$
9
$
18
$
36
$
50
(a)
Transaction costs represent external costs
directly related to acquiring businesses and primarily includes
expenditures for banking, legal, accounting and other similar
services. Included in Restructuring charges and certain
acquisition-related costs.
(b)
Integration costs represent external,
incremental costs directly related to integrating acquired
businesses and primarily includes expenditures for consulting and
the integration of systems and processes. Included in Restructuring
charges and certain acquisition-related costs.
(c)
Represents employee termination costs
related to the 2018 acquisition of Abaxis. Included in
Restructuring charges and certain acquisition-related costs.
(d)
Included in Provision for taxes on income.
Represents the tax effect of the associated pre-tax
acquisition-related amounts, calculated by determining the
jurisdictional location of the pre-tax amounts and applying that
jurisdiction's applicable tax rate. For the twelve months ended
December 31, 2018, also includes a tax charge related to the
non-deductibility of certain costs associated with the 2018
acquisition of Abaxis.
(2) Certain significant items
include the following:
Fourth Quarter
Full Year
2019
2018
2019
2018
Operational efficiency initiative(a)
$
—
$
(1
)
$
(20
)
$
(1
)
Supply network strategy(b)
—
2
7
10
Other restructuring charges and
cost-reduction/productivity initiatives(c)
8
(4
)
8
7
Net gain on sale of assets(d)
—
(42
)
—
(42
)
Other(e)
3
—
72
(17
)
Total certain significant
items—pre-tax
11
(45
)
67
(43
)
Income taxes(f)
—
(13
)
4
29
Total certain significant items—net of
tax
$
11
$
(32
)
$
63
$
(72
)
(a)
For 2019, represents income resulting from
a payment received pursuant to an agreement related to the 2016
sale of certain U.S. manufacturing sites.
(b)
Represents consulting fees and product
transfer costs, included in Cost of sales, and employee termination
costs and exit costs, included in Restructuring charges and certain
acquisition-related costs, related to cost-reduction and
productivity initiatives.
(c)
For 2019, represents employee termination
costs incurred as a result of the CEO transition, included in
Restructuring charges and certain acquisition-related costs. For
2018, represents employee termination costs/(reversals) in Europe
as a result of initiatives to better align our organizational
structure, included in Restructuring charges and certain
acquisition-related costs.
(d)
Represents a net gain related to the
divestiture of certain agribusiness products within our
International segment, included in Other
(income)/deductions—net.
(e)
For 2019, primarily represents a change in
estimate related to inventory costing, included in Cost of sales
and the modification of share-based compensation related to CEO
transition-related costs, included in Selling, general and
administrative expenses. For 2018, primarily represents a net gain
related to the relocation of a manufacturing site in China,
included in Other (income)/deductions—net.
(f)
Included in Provision for taxes on income.
Represents the tax effect of the associated pre-tax certain
significant items amounts, calculated by determining the
jurisdictional location of the pre-tax amounts and applying that
jurisdiction's applicable tax rate. For 2018, also includes (i) a
net tax benefit of $45 million related to a measurement period
adjustment to the one-time mandatory deemed repatriation tax on the
company's undistributed non-U.S. earnings, pursuant to the Tax Act
and (ii) a tax charge of approximately $17 million related to the
disposal of certain assets.
ZOETIS INC.
ADJUSTED SELECTED COSTS AND
EXPENSES(a)
(UNAUDITED)
(millions of dollars)
Fourth Quarter
% Change
2019
2018
Total
Foreign Exchange
Operational(b)
Adjusted cost of sales
$
527
$
526
—
%
(5
)%
5
%
As a percent of revenue
31.5
%
33.6
%
NA
NA
NA
Adjusted SG&A expenses
$
452
$
401
13
%
(1
)%
14
%
Adjusted R&D expenses
131
124
6
%
(1
)%
7
%
Adjusted net income attributable to
Zoetis
440
382
15
%
2
%
13
%
Full Year
% Change
2019
2018
Total
Foreign Exchange
Operational(b)
Adjusted cost of sales
$
1,891
$
1,876
1
%
(6
)%
7
%
As a percent of revenue
30.2
%
32.2
%
NA
NA
NA
Adjusted SG&A expenses
$
1,564
$
1,450
8
%
(3
)%
11
%
Adjusted R&D expenses
455
430
6
%
(1
)%
7
%
Adjusted net income attributable to
Zoetis
1,755
1,525
15
%
1
%
14
%
(a)
Adjusted cost of sales, adjusted selling,
general, and administrative (SG&A) expenses, adjusted research
and development (R&D) expenses, and adjusted net income
attributable to Zoetis (non-GAAP financial measures) are defined as
the corresponding reported U.S. GAAP income statement line items
excluding purchase accounting adjustments, acquisition-related
costs, and certain significant items. These adjusted income
statement line item measures are not, and should not be viewed as,
substitutes for the corresponding U.S. GAAP line items. The
corresponding U.S. GAAP line items and reconciliations of reported
to adjusted information are provided in Condensed Consolidated
Statements of Income and Reconciliation of GAAP Reported to
Non-GAAP Adjusted Information.
(b)
Operational growth (a non-GAAP financial
measure) is defined as growth excluding the impact of foreign
exchange.
ZOETIS INC.
2020 GUIDANCE
Selected Line Items (millions of dollars,
except per share amounts)
Full Year 2020
Revenue
$6,650 to $6,800
Operational growth(a)
7.0% to 9.5%
Adjusted cost of sales as a percentage of
revenue(b)
30% to 31%
Adjusted SG&A expenses(b)
$1,590 to $1,640
Adjusted R&D expenses(b)
$455 to $475
Adjusted interest expense and other
(income)/deductions(b)
Approximately $215
Effective tax rate on adjusted
income(b)
20% to 21%
Adjusted diluted EPS(b)
$3.90 to $4.00
Adjusted net income(b)
$1,865 to $1,915
Operational growth(a)(c)
8% to 11%
Certain significant items and
acquisition-related costs(d)
$20 to $30
The guidance reflects foreign exchange rates as of late January
2020.
Reconciliations of 2020 reported guidance to 2020 adjusted
guidance follows:
(millions of dollars, except per share
amounts)
Reported
Certain significant items and
acquisition-related costs(d)
Purchase accounting
Adjusted(b)
Cost of sales as a percentage of
revenue
30.3% to 31.3%
~ (0.2%)
~ (0.1%)
30% to 31%
SG&A expenses
$1,661 to $1,711
~ ($6)
~ ($65)
$1,590 to $1,640
R&D expenses
$457 to $477
~ ($2)
$455 to $475
Interest expense and other
(income)/deductions
~ $195
~ $20
~ $215
Effective tax rate
19.5% to 20.5%
~ 0.5%
20% to 21%
Diluted EPS
$3.53 to $3.65
$0.04 to $0.06
~ $0.31
$3.90 to $4.00
Net income attributable to Zoetis
$1,685 to $1,745
$20 to $30
~ $150
$1,865 to $1,915
(a)
Operational growth (a non-GAAP financial
measure) excludes the impact of foreign exchange.
(b)
Adjusted net income and its components and
adjusted diluted EPS are defined as reported U.S. GAAP net income
and its components and reported diluted EPS excluding purchase
accounting adjustments, acquisition-related costs and certain
significant items. Adjusted cost of sales, adjusted SG&A
expenses, adjusted R&D expenses, and adjusted interest expense
and other (income)/deductions are income statement line items
prepared on the same basis, and, therefore, components of the
overall adjusted income measure. Despite the importance of these
measures to management in goal setting and performance measurement,
adjusted net income and its components and adjusted diluted EPS are
non-GAAP financial measures that have no standardized meaning
prescribed by U.S. GAAP and, therefore, have limits in their
usefulness to investors. Because of the non-standardized
definitions, adjusted net income and its components and adjusted
diluted EPS (unlike U.S. GAAP net income and its components and
diluted EPS) may not be comparable to the calculation of similar
measures of other companies. Adjusted net income and its components
and adjusted diluted EPS are presented solely to permit investors
to more fully understand how management assesses performance.
Adjusted net income and its components and adjusted diluted EPS are
not, and should not be viewed as, substitutes for U.S. GAAP net
income and its components and diluted EPS.
(c)
We do not provide a reconciliation of
forward-looking non-GAAP adjusted net income operational growth to
the most directly comparable U.S. GAAP reported financial measure
because we are unable to calculate with reasonable certainty the
foreign exchange impact of unusual gains and losses,
acquisition-related expenses, potential future asset impairments
and other certain significant items, without unreasonable effort.
The foreign exchange impacts of these items are uncertain, depend
on various factors, and could have a material impact on U.S. GAAP
reported results for the guidance period.
(d)
Primarily includes certain nonrecurring
costs related to acquisitions and other charges.
ZOETIS INC.
CONSOLIDATED REVENUE BY
SEGMENT(a) AND SPECIES
(UNAUDITED)
(millions of dollars)
Fourth Quarter
% Change
2019
2018
Total
Foreign Exchange
Operational(b)
Revenue:
Livestock
$
868
$
872
—
%
(2
)%
2
%
Companion Animal
784
664
18
%
(1
)%
19
%
Contract Manufacturing & Human
Health
22
28
(21
)%
(2
)%
(19
)%
Total Revenue
$
1,674
$
1,564
7
%
(2
)%
9
%
U.S.
Livestock
$
372
$
384
(3
)%
—
%
(3
)%
Companion Animal
489
425
15
%
—
%
15
%
Total U.S. Revenue
$
861
$
809
6
%
—
%
6
%
International
Livestock
$
496
$
488
2
%
(3
)%
5
%
Companion Animal
295
239
23
%
(3
)%
26
%
Total International Revenue
$
791
$
727
9
%
(3
)%
12
%
Livestock:
Cattle
$
506
$
525
(4
)%
(2
)%
(2
)%
Swine
162
163
(1
)%
(2
)%
1
%
Poultry
142
127
12
%
(1
)%
13
%
Fish
44
40
10
%
(7
)%
17
%
Other
14
17
(18
)%
(7
)%
(11
)%
Total Livestock Revenue
$
868
$
872
—
%
(2
)%
2
%
Companion Animal:
Dogs and Cats
$
719
$
613
17
%
(2
)%
19
%
Horses
65
51
27
%
1
%
26
%
Total Companion Animal Revenue
$
784
$
664
18
%
(1
)%
19
%
(a)
For a description of each segment, see
Zoetis' most recent Annual Report on Form 10-K.
(b)
Operational revenue growth (a non-GAAP
financial measure) is defined as revenue growth excluding the
impact of foreign exchange.
ZOETIS INC.
CONSOLIDATED REVENUE BY
SEGMENT(a) AND SPECIES
(UNAUDITED)
(millions of dollars)
Full Year
% Change
2019
2018
Total
Foreign Exchange
Operational(b)
Revenue:
Livestock
$
3,030
$
3,154
(4
)%
(3
)%
(1
)%
Companion Animal
3,145
2,613
20
%
(3
)%
23
%
Contract Manufacturing & Human
Health
85
58
47
%
(1
)%
48
%
Total Revenue
$
6,260
$
5,825
7
%
(3
)%
10
%
U.S.
Livestock
$
1,219
$
1,269
(4
)%
—
%
(4
)%
Companion Animal
1,984
1,608
23
%
—
%
23
%
Total U.S. Revenue
$
3,203
$
2,877
11
%
—
%
11
%
International
Livestock
$
1,811
$
1,885
(4
)%
(6
)%
2
%
Companion Animal
1,161
1,005
16
%
(5
)%
21
%
Total International Revenue
$
2,972
$
2,890
3
%
(6
)%
9
%
Livestock:
Cattle
$
1,654
$
1,754
(6
)%
(4
)%
(2
)%
Swine
611
663
(8
)%
(3
)%
(5
)%
Poultry
559
522
7
%
(3
)%
10
%
Fish
134
132
2
%
(4
)%
6
%
Other
72
83
(13
)%
(6
)%
(7
)%
Total Livestock Revenue
$
3,030
$
3,154
(4
)%
(3
)%
(1
)%
Companion Animal:
Dogs and Cats
2,950
2,445
21
%
(2
)%
23
%
Horses
195
168
16
%
(3
)%
19
%
Total Companion Animal Revenue
$
3,145
$
2,613
20
%
(3
)%
23
%
(a)
For a description of each segment, see
Zoetis' most recent Annual Report on Form 10-K.
(b)
Operational revenue growth (a non-GAAP
financial measure) is defined as revenue growth excluding the
impact of foreign exchange.
ZOETIS INC.
CONSOLIDATED REVENUE BY KEY
INTERNATIONAL MARKETS
(UNAUDITED)
(millions of dollars)
Fourth Quarter
% Change
2019
2018
Total
Foreign Exchange
Operational(a)
Total International
$
791.6
$
727.2
9
%
(3
)%
12
%
Australia
46.4
36.8
26
%
(7
)%
33
%
Brazil
86.9
84.6
3
%
(7
)%
10
%
Canada
64.9
64.4
1
%
(1
)%
2
%
China
44.4
41.3
8
%
(2
)%
10
%
France
33.7
38.3
(12
)%
(4
)%
(8
)%
Germany
42.6
34.9
22
%
(5
)%
27
%
Italy
30.1
24.5
23
%
(4
)%
27
%
Japan
40.5
34.9
16
%
4
%
12
%
Mexico
29.4
26.2
12
%
—
%
12
%
Spain
28.2
26.8
5
%
(5
)%
10
%
United Kingdom
52.7
46.1
14
%
(3
)%
17
%
Other Developed
100.7
95.5
5
%
(5
)%
10
%
Other Emerging
191.1
172.9
11
%
(2
)%
13
%
Full Year
% Change
2019
2018
Total
Foreign Exchange
Operational(a)
Total International
$
2,972.2
$
2,889.8
3
%
(6
)%
9
%
Australia
195.9
188.6
4
%
(8
)%
12
%
Brazil
293.0
294.7
(1
)%
(10
)%
9
%
Canada
206.4
202.8
2
%
(3
)%
5
%
China
200.1
211.4
(5
)%
(4
)%
(1
)%
France
116.7
129.8
(10
)%
(5
)%
(5
)%
Germany
153.3
146.8
4
%
(6
)%
10
%
Italy
112.0
104.0
8
%
(5
)%
13
%
Japan
158.1
149.0
6
%
1
%
5
%
Mexico
116.6
100.0
17
%
(1
)%
18
%
Spain
114.4
109.9
4
%
(6
)%
10
%
United Kingdom
198.1
181.2
9
%
(6
)%
15
%
Other Developed
370.1
361.4
2
%
(6
)%
8
%
Other Emerging
737.5
710.2
4
%
(7
)%
11
%
(a)
Operational revenue growth (a non-GAAP
financial measure) is defined as revenue growth excluding the
impact of foreign exchange.
ZOETIS INC.
SEGMENT(a) EARNINGS
(UNAUDITED)
(millions of dollars)
Fourth Quarter
% Change
2019
2018
Total
Foreign Exchange
Operational(b)
U.S.:
Revenue
$
861
$
809
6
%
—
%
6
%
Cost of sales
187
175
7
%
—
%
7
%
Gross profit
674
634
6
%
—
%
6
%
Gross margin
78.3
%
78.4
%
Operating expenses
176
128
38
%
—
%
38
%
Other (income)/deductions
—
—
*
*
*
U.S. Earnings
$
498
$
506
(2
)%
—
%
(2
)%
International:
Revenue
$
791
$
727
9
%
(3
)%
12
%
Cost of sales
263
240
10
%
(3
)%
13
%
Gross profit
528
487
8
%
(4
)%
12
%
Gross margin
66.8
%
67.0
%
Operating expenses
148
148
—
%
(3
)%
3
%
Other (income)/deductions
—
1
*
*
*
International Earnings
$
380
$
338
12
%
(4
)%
16
%
Total Reportable Segments
$
878
$
844
4
%
(1
)%
5
%
Other business activities(c)
(102
)
(90
)
13
%
Reconciling Items:
Corporate(d)
(195
)
(196
)
(1
)%
Purchase accounting adjustments(e)
(55
)
(67
)
(18
)%
Acquisition-related costs(f)
(10
)
(22
)
(55
)%
Certain significant items(g)
(11
)
45
*
Other unallocated(h)
(68
)
(96
)
(29
)%
Total Earnings(i)
$
437
$
418
5
%
(a)
For a description of each segment, see
Zoetis' most recent Annual Report on Form 10-K.
(b)
Operational growth (a non-GAAP financial
measure) is defined as growth excluding the impact of foreign
exchange.
(c)
Other business activities reflect the
research and development costs managed by our Research and
Development organization as well as our contract manufacturing and
human health businesses.
(d)
Corporate includes, among other things,
administration expenses, interest expense, certain compensation
costs, certain procurement costs, and other costs not charged to
our operating segments.
(e)
Purchase accounting adjustments include
certain charges related to the amortization of fair value
adjustments to inventory, intangible assets and property, plant and
equipment not charged to our operating segments.
(f)
Acquisition-related costs include costs
associated with acquiring and integrating newly-acquired
businesses, such as transaction costs and integration costs.
(g)
Certain significant items includes
substantive, unusual items that, either as a result of their nature
or size, would not be expected to occur as part of our normal
business on a regular basis. Such items primarily include
restructuring charges and implementation costs associated with our
cost-reduction/productivity initiatives that are not associated
with an acquisition, costs associated with the operational
efficiency initiative and supply network strategy, and the impact
of divestiture- related gains and losses.
(h)
Includes overhead expenses associated with
our manufacturing and supply operations not directly attributable
to an operating segment, as well as certain procurement costs.
(i)
Defined as income before provision for
taxes on income.
* Calculation not meaningful.
ZOETIS INC.
SEGMENT(a) EARNINGS
(UNAUDITED)
(millions of dollars)
Full Year
% Change
2019
2018
Total
Foreign Exchange
Operational(b)
U.S.:
Revenue
$
3,203
$
2,877
11
%
—
%
11
%
Cost of sales
655
606
8
%
—
%
8
%
Gross profit
2,548
2,271
12
%
—
%
12
%
Gross margin
79.6
%
78.9
%
Operating expenses
543
456
19
%
—
%
19
%
Other (income)/deductions
—
—
*
*
*
U.S. Earnings
$
2,005
$
1,815
10
%
—
%
10
%
International:
Revenue
$
2,972
$
2,890
3
%
(6
)%
9
%
Cost of sales
925
929
—
%
(8
)%
8
%
Gross profit
2,047
1,961
4
%
(5
)%
9
%
Gross margin
68.9
%
67.9
%
Operating expenses
560
559
—
%
(6
)%
6
%
Other (income)/deductions
—
3
*
*
*
International Earnings
$
1,487
$
1,399
6
%
(4
)%
10
%
Total Reportable Segments
$
3,492
$
3,214
9
%
(1
)%
10
%
Other business activities(c)
(348
)
(337
)
3
%
Reconciling Items:
Corporate(d)
(707
)
(666
)
6
%
Purchase accounting adjustments(e)
(234
)
(162
)
44
%
Acquisition-related costs(f)
(43
)
(63
)
(32
)%
Certain significant items(g)
(67
)
43
*
Other unallocated(h)
(292
)
(339
)
(14
)%
Total Earnings(i)
$
1,801
$
1,690
7
%
(a)
For a description of each segment, see
Zoetis' most recent Annual Report on Form 10-K.
(b)
Operational growth (a non-GAAP financial
measure) is defined as growth excluding the impact of foreign
exchange.
(c)
Other business activities reflect the
research and development costs managed by our Research and
Development organization as well as our contract manufacturing and
human health businesses.
(d)
Corporate includes, among other things,
administration expenses, interest expense, certain compensation
costs, certain procurement costs, and other costs not charged to
our operating segments.
(e)
Purchase accounting adjustments include
certain charges related to the amortization of fair value
adjustments to inventory, intangible assets and property, plant and
equipment not charged to our operating segments.
(f)
Acquisition-related costs include costs
associated with acquiring and integrating newly- acquired
businesses, such as transaction costs and integration costs.
(g)
Certain significant items includes
substantive, unusual items that, either as a result of their nature
or size, would not be expected to occur as part of our normal
business on a regular basis. Such items primarily include
restructuring charges and implementation costs associated with our
cost-reduction/productivity initiatives that are not associated
with an acquisition, costs associated with the operational
efficiency initiative and supply network strategy, and the impact
of divestiture- related gains and losses.
(h)
Includes overhead expenses associated with
our manufacturing and supply operations not directly attributable
to an operating segment, as well as certain procurement costs.
(i)
Defined as income before provision for
taxes on income.
* Calculation not meaningful.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200213005399/en/
Media: Bill Price 1-973-443-2742
(o) william.price@zoetis.com
Kristen Seely 1-973-443-2777 (o) kristen.seely@zoetis.com
Investors: Steve Frank
1-973-822-7141 (o) steve.frank@zoetis.com
Marissa Patel 1-973-443-2996 (o) marissa.patel@zoetis.com
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